Good title is an implied condition of a contract of sale of land that the seller must convey to the buyer a good, marketable title that has no defects, no burdens, and no hazardous litigation that may result from third parties with protectedlegal interests in the property.
A buyer can rescind a contract for unmarketable title when there is a defect of substantial character making the property reasonably subject to potential third-party litigation. A defect of substantial character must diminish the quantity, quality, or value of property.
An example of a defect in title is if a mortgage was filed against the property and the mortgage was never satisfied or if there is no satisfaction of the mortgage in the record file.
Recording the validity of a deed is prima facie evidence of good title. While recording is not concrete evidence, as title defects could still exist, recording establishes a system of public recordation of land titles, assuring title and determining the priority of rights to a parcel of land. Recording also preserves in a secure place important documents and protects purchasers for value and lien creditors against prior unrecorded interest.
Lawyers may conduct title searches to determine if there are any defects in the title chain. A title insurance company may also conduct its own search to determine good title. However, title insurance only insures against defects found in the public record, and does not reflect other reasons for a defect in title such as adverse possession, violations of zoning laws, violations of private covenants, or violations of state environmental laws.
[Last updated in January of 2022 by the Wex Definitions Team]
